Modern Awards Pay Rates Increasing 4.75% From 1 July 2026: Employer Payroll Checklist

Introduction: What’s Changing & When

From 1 July 2026, all Modern Award minimum wages and the National Minimum Wage are increasing by 4.75% across Australia. The National Minimum Wage is rising to $1,004.90 per week ($26.44/hour). This is not optional — if your employees are covered by a Modern Award or work below the new minimum wage thresholds, you must update payroll systems, rosters, and enterprise agreements before the deadline.

This affects every employer paying under an award or minimum wage. Failing to comply exposes you to Fair Work Ombudsman investigations, penalty infringement notices (up to $79,250 for serious contraventions), and employee claims for wage recovery. The Fair Work Commission has locked in the rate — there are no exemptions for small business.

What’s Changing: The 4.75% Increase Breakdown

The 4.75% increase applies to:

• National Minimum Wage: $960 → $1,004.90 per week
• All Modern Award minimum rates (120+ awards)
• Junior rates, apprentice rates, and casual loadings (adjusted proportionally)
• Trainee classifications
• Superannuation preservation thresholds (updated automatically)

Your obligations don’t end at base rates. You also need to review:

• Penalty rates — weekends, nights, public holidays (increase proportionally)
• Allowances — tools, meals, uniforms (some adjust automatically, others don’t)
• Overtime thresholds — triggering points for time-and-a-half or double-time
• Award classifications — if you haven’t reviewed your employee classifications in 12+ months, now is the time

Which Employees Are Affected & Timeline

All full-time and part-time employees in:

• Hospitality, retail, manufacturing, healthcare, aged care, construction, transport
• Administrative, professional, technical roles (check if your industry has a Modern Award)
• Casual employees (base rate + 25% casual loading increases too)

Exclusions: Senior executive roles (often outside an award), some federal enterprise agreements (if properly certified), and specific exemptions under transitional arrangements (very rare).

The change applies automatically on 1 July. You don’t need Fair Work approval — just update your systems.

Why Compliance Matters: Risk & Cost Impact

Non-compliance costs are real:

• Underpaying an employee even $5/week for a team of 10 can trigger $20,000+ in back-pay claims
• Fair Work Ombudsman has stepped up award compliance audits — they contact employers directly
• Courts have upheld substantial penalties for systematic underpayment, even if unintentional
• Employees (and their lawyers) track wage reviews — they know when rates change

Payroll impact: For a team of 20 employees on modern awards at $60,000–$70,000 salary, expect a payroll increase of ~$3,000–$5,000 annually (4.75% on award rates, plus flow-on to superannuation, leave accruals, and penalty rates).

Step 1: Check Which Modern Award Applies

Start here: Fair Work Commission Awards List (fwc.gov.au) or P.A.C.T (Pay and Conditions Tool) at fairwork.gov.au. Search by industry. Common awards include:

• General Retail Industry Award 2020 — retail stores, shopping centres
• Hospitality Industry (General) Award 2020 — restaurants, cafes, hotels
• Manufacturing and Associated Industries Award 2020 — factories, production lines
• Health Professionals Award 2015 — nurses, allied health
• Administrative and Clerical Award 2020 — office staff, receptionists
• Road Transport Award 2020 — truck drivers, couriers

Download the full award document (not a pay guide). Section 3 or 4 contains all minimum rates by classification.

Step 2: Map Employees to Award Classifications

Modern Awards have multiple classifications with different pay rates. Create a simple spreadsheet mapping each employee:

• Employee name
• Award
• Classification
• Current weekly rate
• New rate (add 4.75%)
• Increase amount

Example: Sales Assistant on General Retail Award was $960/week, now $1,004.90/week (+$44.90). If you’ve paid staff above the award minimum, they may not get the full 4.75% increase—only if they’re on the award floor.

Step 3: Recalculate Payroll & Superannuation

Once you know new rates, take action immediately:

1. Update payroll system now — don’t wait until 30 June. Test changes in a sandboxed run before going live. Most payroll software (Xero, Paychex, Deputy) have built-in Modern Award calculators.
2. Recalculate superannuation contributions. Super preservation thresholds may shift. Confirm the new floor.
3. Update leave accruals. Annual leave, long service leave, and other paid leave are often calculated as a % of ordinary pay. Recalculate pro-rata.
4. Check penalty rates and allowances. If your award specifies “25% loading for casual work” or “time-and-a-half for Sunday work,” these scale up with the 4.75% increase.

Step 4: Review Enterprise Agreements

If you have an enterprise agreement (EA), check for a “safety net” clause tying pay to Modern Awards. Most modern EAs include language like: “Employees’ pay will not be less favourable than the relevant Modern Award at all times.”

If your EA has this, you must update employee rates to match the new award rates. This is a Fair Work Act requirement. If your EA specifies absolute rates (e.g., “$1,500/week fixed”), you may have discretion—but we recommend aligning with Modern Awards unless your EA explicitly excludes this requirement. Consult an employment lawyer if unsure.

Step 5: Communicate Changes to Employees

Send a clear, dated notice to affected employees before 1 July:

“From 1 July 2026, your award rate is increasing by 4.75% as per the Fair Work Commission’s Annual Wage Review decision. Your new weekly rate will be $[amount]. This change is automatic and applies to all employees on Modern Awards. Your payslip from [pay period starting 1 July] will reflect the increase.”

Include: new rate (weekly and hourly), effective date, confirmation that it’s automatic, and breakdown of changes to allowances or penalty rates. This transparency reduces disputes and demonstrates good faith compliance.

Step 6: Audit Your Payroll History (Last 12 Months)

If you’ve been underpaying prior to 1 July, you may owe back-pay. Fair Work Ombudsman investigations often uncover historical shortfalls.

Action: Pull your last 12 months of payroll. For each employee, compare actual pay to the Modern Award rate for their classification. Confirm all penalty rates, allowances, and super contributions were correct. If underpayment is found (even $50), calculate back-pay immediately and offer to settle.

Example: If an employee was entitled to $25/hour under award but paid $24/hour for 52 weeks at 40 hours/week, they’re owed 52 × 40 × $1 = $2,080 plus interest. Fair Work Ombudsman does not care about intent. Innocent underpayment is still underpayment.

Step 7: Update Policies & Templates

If you have standard employment contracts or induction documents referencing award rates, update them now. Remove specific dollar figures (they’ll be obsolete next year)—instead, reference the Modern Award and FWC wage review schedule.

Common Employer Mistakes to Avoid

1. Only updating base rates, forgetting allowances & loadings. Mistake: Raising a casual’s base to $26.44/hour but forgetting the 25% loading jumps from $30/hour to $33.05/hour. Fix: Recalculate all components.

2. Assuming “above award” employees don’t need a change. Mistake: Employee on $1,100/week already—don’t need to adjust. Reality: If the award rate moves to $1,004.90 and your employee was $95 above the old award, they should now be higher. Fix: Clarify your company policy—do you index to awards, or maintain fixed premium?

3. Delaying payroll system updates. Mistake: “We’ll fix it after 1 July.” Reality: Employees notice immediately. Being late invites complaint. Fix: Update by 25 June.

4. Ignoring enterprise agreements. Mistake: “We have an EA, so the award increase doesn’t matter.” Reality: If the EA says “not less favourable than award,” you may owe the difference. Fix: Review EA terms.

5. Not documenting the change. Mistake: Just update payroll quietly. Reality: If an employee disputes pay or Fair Work investigates, you need a paper trail. Fix: Document the wage review decision, audit, and new rates.

Before 1 July 2026: Deadline Checklist

• [ ] Identify which Modern Award(s) apply to your business
• [ ] Map all employees to award classifications
• [ ] Calculate new pay rates (4.75% increase + allowances/penalties)
• [ ] Update payroll system and test in sandbox
• [ ] Recalculate super contributions and leave accruals
• [ ] Review and update any enterprise agreements
• [ ] Audit last 12 months of payroll for underpayment
• [ ] Send notice to affected employees (with new rates)
• [ ] Update employment contracts and policy templates
• [ ] Brief payroll team on changes